[ET Net News Agency, 20 July 2018] Daiwa Research lowered its target price for Beijing
Enterprises Water (BEW)(00371) to HK$6 from HK$6.35, and maintained its "buy" rating.
BEW is guiding for slower recurring net-profit growth of 20-25% YoY for 2018 (2017: 31%
YoY), due mainly to slower project progress against the backdrop of tightening PPP policy.
The research house expects BEW to see 13-15% YoY net profit growth in 1H. Despite a
tougher policy environment and rising interest rates, Daiwa thinks BEW could still be the
beneficiary of a tougher business environment in the long run.
Daiwa believes that an interest rate hike in 2018 will eliminate some competition and
benefit BEW, which has a capital advantage. BEW undertook an equity placement and
completed all of its debt refinancing in 1H, allowing it to have a stronger balance sheet
to consolidate the market should there be a distressed sale of water assets. (KL)